UN urges end to fossil fuel subsidies

Scrapping subsidies designed to bring down the cost of energy could slash greenhouse gas emissions by six per cent in one swoop, while also delivering a boost to the global economy, according to a new study from the United Nations Environment Programme (UNEP).

Released last week, Reforming Energy Subsidies: Opportunities to Contribute to the Climate Change Agenda claims that around $300bn or 0.7 per cent of GDP is spent on energy subsidies each year.

It argues that while some energy subsidies, such as the feed in tariffs pioneered in Germany serve to accelerate the adoption of low carbon technologies, the vast majority are used to artificially lower the price of fossil fuel based energy.

Advocates of these subsidies claim they are necessary to protect the poor from fuel poverty and help bolster economies at a time of high fuel prices. But the report argues this is a misconception, insisting that the subsidies are largely exploited by the well off and are in fact a drain on the global economy.

It calculates that scrapping them would not only lead to a six per cent fall in global carbon emissions, but also result in an increase in GDP of 0.1 per cent and help accelerate adoption of low carbon technologies.

Achim Steiner, UN Under-Secretary General and UNEP executive director, said that subsidies were often only introduced for political reasons and were guilty of "simply propping up and perpetuating inefficiencies in the global economy".

The report cites as an example Liquid Petroleum Gas subsidies in India which cost $1.7bn in the first half of the current financial year and are designed to encourage use of the fuel in poor households. However, the study found that the scheme was primarily benefiting higher income households, many of whom could have afforded the fuel anyway.

Steiner urged all governments to review their energy subsidy policies as a matter of urgency before the culmination of international negotiations to agree a successor to the Kyoto Deal in Copenhagen next year. "Governments should… begin phasing out the harmful [subsidies] that contribute to the wasteful use of finite resources and delay the introduction of renewables or more efficient forms of generation while creating disincentives and barriers to public transport up to energy saving appliances," he said.

The report came as UN Secretary General Ban Ki-moon warned that negotiators needed to make demonstrable progress towards a post-Kyoto deal at the next round of talks in Poznan, Poland, in December or risk the negotiations failing.

Speaking yesterday, Ki-moon said negotiators must "fight the urge to postpone everything until Copenhagen", adding that concrete progress on some issues was required before then.

"I would emphasise the need to make the most of the upcoming opportunity in Poznan," he said. "It is my sincere hope that by the end of this year in Poznan, parties to the climate change convention will have achieved a better understanding of a shared vision for long-term co-operative action."

His comments echo those of the UN's top climate change official Yvo de Boer, who last week said that he hoped that the UN would have something "close to a negotiating text" ready by the time delegates gather in Poznan.